Planning your retirement life with effective pension plans in your portfolio is a great way to secure your future. While choosing a retirement plan, you must ensure the plan is in-sync with your investment goals. Thus, opting for ULIP plans (Unit Linked Insurance Plan) is a two-in-one option to secure life insurance and invest at the same time.
Retirement planning by purchasing good pension plans is a way of ensuring that when your regular income stops, you still have an income source to rely on for monthly expenditure. Retirement planning is also vital to keep your loved ones’ life stable after the unfortunate event of the policy-bearer’s death. Hence, it becomes the responsibility of the family’s breadwinner to smartly plan their retirement life, and consider only the best insurance policies.
What is a pension plan?
In addition to the overall financial plans, retirement or pension plans are an excellent medium of investment. The policyholder’s nominees receive a certain amount from the insurance company at the event of untimely death of the policy-holder. If the policy-holder retires and continues living beyond retirement, they receive a certain amount from the insurance provider. To develop a sufficient corpus, it is essential to get into regular investment practices through pension plans. After the maturity of the plan, you get regular monthly income to take care of your family expenses during your post-employment years. This sum of money is either called pension or annuity.
What are ULIP plans?
Regular life insurance plans usually have low returns. Through ULIP investments, you can ensure increased income sources during retirement life. A ULIP is a combination of insurance and investment. Some part of your premium is used to cover the insurance while some is invested by the company.
Benefits of pension plans
Here are some of the pension benefits one gets when investing in a pension plan:
Guaranteed Income
Pension plans with ULIP policy provide instant and steady income after retirement or investment. Getting a financially independent life after retiring is the first step in planning a stable future. You must calculate and estimate your future investments and spending beforehand and get a suitable savings policy.
Liquidity
Generally, the liquidity in retirement plans is low. But some plans might offer withdrawal policies during the accumulation stage. This serves as a relief during uncertain times or emergencies without getting into the hassle of acquiring additional loans.
Tax Regulation
The Canara HSBC Oriental Bank Of Commerce – Guaranteed Savings Plan provides tax exemption specified under Section 80C and Section 10C of the Income Tax Act. The policyholder would be entitled to receive tax benefits under the policy.
Vesting Age
While investing in a retirement policy, you must check the vesting age. It refers to the age when the client starts receiving the monthly pension. Most pension plans have a minimum age of 45 years with flexibility up to the age of 70 years.
Accumulation Duration
ULIPs under the retirement policies offer an advantage of investing while securing your future. This means you have to pay a premium from time to time. Some plans offer an option to the investor to either pay the sum of money at once or in periodic intervals. The money is accumulated simultaneously over time. Thus, it is important to decide the age that you start investing. Starting to invest early will accordingly affect your pension that arrives from this corpus.
Payment Period
The payment period is different from the accumulation period. A payment period is when you start receiving a pension after your retirement. Some plans provide full/ partial withdrawal facilities during the accumulation period. For example – if you receive the pension from 60 years to 75 years, then the payment period would be 15 years.
Life Insurance Cover
Some policies offer a life cover. In case of death of the policyholder during the Policy Term, the amount is paid to the nominee or the family members to support their life
Types of pension plans
It is always beneficial to start investing in retirement plans in the early stages of life. Therefore, you must know the different types of pension plans available to choose from.
Deferred Annuity Plan
It is a flexible scheme that allows you to one-time payments or pay in regular premium payments. The amount invested in this type of plan cannot be withdrawn before the policy term is over.
Immediate Annuity Plan
In this scheme, the pension is granted immediately after the investment. The policyholder pays a lump sum amount and can choose among the annuity options. The nominee of the policyholder will be eligible to get the money in case of the demise of the policyholder.
With-Cover & Without-Cover Plans
The cover amount in a cover pension plan is low and usually goes towards growing the corpus. In this scheme, the dependants of the policyholder are entitled to receive the amount.
In a without cover plan, no life cover policy is provided to the insured person. The deferred pension plans offer a life cover but the annuity plans do not come with a life cover option.
Annuity-Certain Plans
The annuity is paid to the insured person for a certain number of years. You can choose the period of the annuity. If the demise happens, then the amount goes to the beneficiary of the policyholder.
Life Annuity Plan
Under this scheme, the pension is paid until the death of the insured person. You have an option of choosing the “with spouse” option to enable the company to provide the amount to the spouse.
Guaranteed-Period Annuity Plan
A specific time period is set to provide the policyholder with the pension, irrespective of the death of the policyholder within that period. The specific terms can be 5 years, 10 years, or more.
National Pension Scheme
This scheme is introduced by the Government of India. Under this plan, you can invest your money in the New Pension Scheme and it will be invested in equity and debt funds as per your preference.
Pension Funds
This is a long-term pension plan that offers good returns after the maturity period. It enables the policyholder to pull back the annuity at the time of an unexpected crisis. It is regulated by the PFRDA (Pension Fund Regulatory & Development Authority). Getting your future figured out is a big relief especially if your monetary situation is well- planned. You must research properly to be able to get the best pension plan out of the ones available before investing in it. Canara HSBC Oriental Bank Of Commerce – Guaranteed Savings Plan is a ULIP plan to go for if you want to start saving and investing simultaneously. It provides maturity and death benefits along with guaranteed additions on every year of the policy. It offers an option to choose the policy term knowing your financial goals.